It has dawned at last, albeit bit too late! The Rs. 478.92 crore income IDBI Bank Ltd., a new- generation private bank, has finally included branch expansion as the core for its future growth.

Says Mr. Gunit Chadha, the bank’s new managing director and chief executive officer, "Branch expansion to improve our reach is the corner stone of our new business strategy."

Mr. Chadha took over the reins at IDBI Bank a couple of months ago, after spending 16 years with Citibank. He now wants to increase IDBI Bank’s branch network to 110 by the end of next fiscal. Presently the bank has 45 branches. His immediate goal is to add 10 more branches by the end of this fiscal.

Though it was initially thought that the entry of new private sector banks would spell the end of brick and mortar banking, it has become increasingly evident that the presence of a physical branch in major localities is most important for growth.

IDBI Bank's decision to expand its reach has come not a day too late since its peer, ICICI Bank, has already taken a great lead in this regard and is fast expanding its tentacles. The latter already has a network of 103 branches, 25 extension counters and 321-off and on site ATM's. The off-site ATM is an innovative idea of ICICI Bank to capture savings bank accounts - which are far cheaper than other accounts- in bulk.

Compared to this, IDBI Bank's brick and mortar infrastructure pales into insignificance. But part of the reason for that may be attributed to its focus on corporate banking, while ICICI Bank went all out to be a major in the retail segment as well.

Speaking of the economics of investing in a physical branch Mr. Chadha hopes to recover the investment in 12-18 month period. While the per customer servicing cost might be higher in case of a physical branch, the cost of acquisition of a customer is far more cheaper than other forms.

Again, to keep pace with the industry trend and drive down transaction costs, IDBI Bank is planning to supplement its branch network with 250 off site ATM's, kiosks and electronic banking centres during the next 18 months. Not to be left behind in the field of net banking, IDBI Bank will be introducing wireless application protocol (WAP) banking with the technical assistance of the Chennai-based Hexaware Technologies Ltd.

"We have budgeted an outlay of Rs 100 crore for our expansion program from our internal accruals," Mr. Chadha remarks. While the current capital adequacy ratio of 11 per cent is well above the Reserve Bank of India’s prescribed rates, the expansion plans will force the bank to tap the public for funds next year. Though cagey about talking numbers Mr. Chadha says that the banks non performing assets (NPA) stands at a comfortable level of 1.6% of its advances.

Expansion plans apart, Mr. Chadha wants to transform IDBI Bank into a functional organisation. "The bank will still be a corporate bank with 95 per cent of its business accounted by corporates. We will become more industry focussed. However larger focus will be there on the retail segment," he adds. The retail thrust will be on the liability side viz. mobilisation of savings account etc rather than the asset side - retail lending- of the balance sheet.

According to him, old products will be revamped along with the introduction of newer ones. "We were the first one to launch a smart card," he boasts. Elaborating on his idea functional organisation, he says that separate teams for product design and sales will be formed with stiff targets to achieve.

Preceding the organisational transformation will be revamping the bank’s existing technology platform. According to Mr. Chadha, the bank is negotiating with Infosys, Iflex and one more company for this purpose.

Incidentally to actualise the corporate plans, Mr.Chadha will need human resource talent, which does not come cheap. "We are willing to invest in people. We will be recruiting people in all the cadre soon," is all he remarks.

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